Thursday, August 18, 2011

Why did freight electrification fail in America?

Having recently acquired a copy of The Milwaukee Electrics by Noel T. Holley, I thought it might be worthwhile to go through and post some thoughts on why electrification did not become more widespread and was generally dismantled in the United States.

1. Electrification was extremely expensive. The Milwaukee Road’s 654 miles of electrification cost 23 million dollars when completed in 1920, some 200 million dollars adjusted for inflation using a GDP deflator or some 3.78 billion as a relative share of GDP. While that would not pose a major problem for the Class I railroads of today, that amount was a rather large sum for the Milwaukee Road and, in part, led to its bankruptcy in 1925.

2. It did not produce major financial gains, even with regards to steam locomotives. After subtracting the cost of bond and interest payments, electrification amounted to only one million dollars in annual savings on the Rocky Mountain Division and $100,000 on the Coast Division (the Coast Division having had construction and interest prices increase greatly compared to the Rocky Mountain due to World War II). Higher traffic would have greatly increased the savings, however the Milwaukee Road was the Johnny-come-lately transcontinental and suffered accordingly. It is tempting to believe that had it been the Great Northern which electrified instead, the electrification might have been maintained to the present day.

3. The World Wars, Great Depression, and economic troubles for some in the 1920s put severe limits on the financial capability of the major railroads to make the major investments that electrification entailed.

4. Diesels provided nearly all of the advantages of electrification at far less cost. While electrification required the construction of extremely large amounts of infrastructure before a single locomotive could run, diesels could be integrated into the normal purchasing cycle and gradually replace steam locomotives.

5. For quite a long period of time, electrics did not offer a significant difference in motive power cost compared to diesels and could in fact be more expensive to operate. To quote the aforementioned book:

A study performed by Laurence Wylie in 1949 indicated that new diesels would be slightly cheaper to operate on the Coast Division than the old electrics. The purchase price, interest and taxes are what made diesels are more expensive choice.

This closeness of costs was not unique to Milwaukee. A 1948 study on the Great Northern electrification found diesels to be slightly cheaper to operate there also. The Great Northern blamed this on the exorbitant rates it was paying for electric power. Its variable rats went as high as $.01 per kilowatt hour (kwh) including demand charges. Joe Gaynor, who headed the G.N. electrification, felt the rate would have to be cut to $.005 per kwh for economics to justify expansion of their electrification.

Energy costs were one of the factors favoring electrics on the Milwaukee. From the late 1940’s through the late 1960’s, the Milwaukee paid $.09 per gallon for diesel oil compared to $.068 for enough electricity to produce equivalent power. (Calculations and locomotive tests showed that one gallon of oil equaled 12.5 kwh which were purchased for $.00544 per kilowatt hour.) This rate was quite good in comparison to the Pennsylvania RR which paid roughly $.009 in 1950 and $.013 by 1966.

Today of course, the situation is quite different when it comes to the price of fuel. However, that does not necessarily support electrification of the mainline corridors as a real possibility within the next few years. With only a limited amount of funding available for improvements, expansion of freight service is likely to be a more profitable endeavor, and so receive the monies, than electrification absent a public-private partnership for the purpose of electrification.

De-electrification was expensive, but cheaper than the alternatives. In the 1960s at least, simply supplementing the Little Joe's was 14.4 million vs a dieselization cost of 16.3 million (not sure if that includes a credit for electrification scrap, I suspect not). Electrifying the gap plus the earlier locomotives was 24.7 million. Given the financial realities of the Milwaukee Road and the limited financial benefit that electrification represented at the time, it's not too terribly surprising that it wasn't gone for. Perhaps the electrification could have been saved if they had released the funds to purchase all twenty Little Joes and parts in 1949, but I find the decision to take it down understandable and don't think that they could have survived long term anyhow.

I think, at least in the West, it was also a matter of timing and geography: even in the 1920s, the west did not have a very large proportion of the country's population, and there just wasn't enough traffic to justify electrification. Then the Depression and WWII limited the railroads' ability to invest in infrastructure, and by the time they recovered from that, the Interstates started stealing away their traffic. The middle bit of the country isn't really good for freight electrification since it's mostly flat, which leaves the Appalachian crossings, where there were in fact a few electrified lines: the N&W and Virginian. It's a bit surprising that the PRR did not go for electification of the line to Pittsburgh, but perhaps by that point they'd spent all their capital on fancy flying junctions and could only build electrification with government assistance, which the government preferred to go to the NY-DC line so they could get to DC faster.